This paper aims at the stochastic characterization of droughts applying Markov chains modeling to drought class transitions derived from SPI time series. Several sites in Southern Portugal having updated data on precipitation available were considered. The drought class probabilities, the expected residence time in each class of severity, the expected time for the transition between drought classes and the drought severity class predictions 1, 2, or 3 months ahead have been obtained. Those predictions are then compared with observed drought classes for the recent drought periods of 2003–2006. In addition, the estimation of the cumulated precipitation deficits, amount of monthly precipitation needed to decrease drought severity, and foreseen SPI values depending on different precipitation scenarios are also presented as complementing the prediction of drought class transitions.